OT:RR:CTF:VS H168824 KSG
Port Director
Lincoln/Juarez Bridge
Administrative Building 2
U.S. Customs and Border Protection
Laredo, Texas 78040
RE: Protest No. 2304-10-100091; 9817.00.90; jewelry; actual use
Dear Port Director:
This is in response to your memorandum forwarding the Application for Further Review of Protest No. 2304-10-100091 submitted by counsel on behalf of First Cash Financial Services Inc., which concerns the denial of duty-free treatment under subheading 9817.00.90 of the Harmonized Tariff Schedule of the United States (“HTSUS”). At the request of counsel, a conference was held on this matter on November 1, 2011. A supplemental submission dated November 3, 2011, was also submitted and is part of this record.
FACTS:
This case involves previously-owned gold and silver jewelry and coins imported on July 9, 2009. First Cash Financial Services Inc. (“First Cash”) owns and operates pawn shops in Mexico and the U.S. Counsel states that the importation consists of jewelry not suitable for retail sale in their stores. First Cash scraps broken jewelry, incomplete jewelry sets, personalized jewelry, and items it deems unmarketable such as certain coins, aged inventory items or overstocked items. First Cash states that these items are of poor quality, inferior craftsmanship and/or exhibit signs of significant wear. Each item of precious metal is weighed and placed in an individual bag and tagged with an 11-digit inventory number in Mexico. The goods were imported intact. In a letter to CBP dated April 14, 2004, counsel stated that once the jewelry is imported, it is shipped to First Cash’s corporate headquarters in Arlington, Texas, where each item is examined. If an item contains a diamond exceeding 2 points, then that piece of jewelry is segregated from the jewelry to be melted and resold as jewelry. The letter states that this is usually a small amount of jewelry and the remainder of the jewelry is sent via Brinks courier to a company in the U.S. that melts the precious metal.
The Port included a photograph of the imported previously-owned jewelry; all of the pieces were intact rings, earrings, pins, chains, necklaces or religious symbols.
Counsel’s supplemental submission provided documentation showing the movement of jewelry from the store in Mexico to First Cash in Arlington, Texas and then to the melter in the U.S. The first document is a flow chart explaining the documents submitted. The entry summary shows that 1,542 pieces or jewelry were entered, which matches the invoice from First Cash in Mexico to First Cash in Arlington, Texas. The invoice shows that the weight of 1,542 pieces of jewelry is 12934.48 grams of gold jewelry. The green bar document, which is generated by each store in Mexico, lists by store, each item number, a description of the piece of jewelry, and the weight. In Arlington, Texas, a scrap log is prepared. It shows a date, store number, shipment number, cost of gold scrapped, weight of the gold, weight of diamond recovery, if there is one, cost of silver, and weight of the silver and a bag number. In this case, the entry was divided into bags 56 and a portion of bag 57. At this point, there are no item numbers or descriptions of the jewelry, only the weight of the gold and silver. A shipping log shows each bag of gold (ex. bag 56, 57) and the weight of the bag. The total weight given for bags 14-58 on the shipping log is 6,039.29 ounces. There is an air waybill from First Cash in Arlington, Texas to Ohio Precious Metals (“OPM”), the melter, via Brinks. There is an invoice from OPM showing the weight of 6,514.595 ounces of gold. There is also a melt report from OPM showing the net weight received as 6046.245 and the weight after melting as 5778.985.
This case is the lead protest for 73 entries. The goods were classified in subheading 9817.00.90 and also, in subheading 7112.91, HTSUS. The Port sent out a CBP Form 28 on November 10, 2009, requesting further information on the remanufacture or processing of the previously-owned jewelry and coins. CBP denied the classification of the imported goods in subheading 9817.00.90, HTSUS, and the classification of subheading 7112.91, HTSUS, and issued a rate advance on March 9, 2010, for this entry. CBP classified the imported goods in subheading 7113.19.50, HTSUS. The protest was timely filed.
The Protestant timely submitted a certificate attesting to the melting of items of gold in response to the CBP Form 28.
ISSUE:
Whether the imported previously-owned jewelry and coins described above are eligible for classification in subheading 9817.00.90, HTSUS.
LAW AND ANALYSIS:
Subheading 9817.00.90, HTSUS, provides as follows:
Unwrought metal including remelt scrap ingot (except copper, lead, zinc and tungsten) in the form of pigs, ingots or billets (a) which are defective or damaged, or have been produced from melted down metal waste and scrap for convenience in handling and transportation without sweetening, alloying, fluxing or deliberate purifying, and (b) which cannot be commercially used without re-manufacture; relaying or rerolling rails; and articles of metal (except articles of lead, of zinc or of tungsten, and not including metal-bearing materials provided for in section VI, chapter 26 or subheading 8548.10 and not including unwrought metal provided for in chapters 72-81) to be used in remanufacture by melting or to be processed by shredding, shearing, compacting or similar processing which renders them fit only for the recovery of the metal content: other; other (emphasis added)
In Tradewind Farms, Inc. v. United States, Slip. Op. 07-62 (2007), the Court of International Trade discussed subheading 9817.00.50, HTSUS and explained that since the language in the subheading contains the phrase “to be used for”, the subheading is an actual use provision dependent upon the actual use of the merchandise and the conditions of 19 CFR 10.133 must be met. As the language “to be used” is contained in subheading 9817.00.90, HTSUS, this is an actual use provision. Pursuant to 19 CFR 10.133, when the tariff classification of any article is controlled by its actual use in the U.S., three conditions must be met. The three conditions are: 1) such use is intended at the time of importation; 2) the article is so used; and 3) proof of use is furnished within 3 years after the date the article is entered or withdrawn from warehouse for consumption. Further, the requirements of 19 CFR 54.5 and 54.6, which require a bond under certain circumstances, and proof of actual use within 3 years of entry must be met for all goods entered under subheading 9817.00.90. Bond was properly posted in this case and melting certificates were timely filed.
In HQ 967675, dated August 12, 2005, imported gold dore, unwrought, (ingot cast from 90% molten gold) sold to banks and financial institutions was held to be properly classified in subheading 9817.00.90, HTSUS, as an article of metal to be used in remanufacture by melting or to be processed by shredding, shearing, compacting or similar processing, which rendered it fit only for the recovery of the metal content. This ruling held that subheading 9817.00.90, HTSUS, may include imported precious metals such as gold, and that gold dore classified in heading 7108, HTSUS, was within the purview of “articles of metal” as set forth in subheading 9817.00.90, HTSUS. This case involves articles of precious metal classified in heading 7113, HTSUS, which we find would also be considered an “article of metal.”
The issue presented is whether the imported jewelry in this case satisfies the actual use provision set forth in 19 CFR 10.133. The jewelry is shipped after importation to corporate headquarters for resorting to determine which jewelry will be melted. The jewelry not melted is resold. It is at the Arlington, Texas facility after importation where the final determination whether the jewelry will be melted is made. None of the imported jewelry satisfies 19 CFR 10.133 because the protestant has not shown that its use was intended at the time of importation.
Counsel argues that all the items covered by the entry were melted, so the provisions of 19 CFR 10.133 were met. Counsel cites to HQ 223654, dated September 4, 1992, HQ 082360, dated March 15, 1991, and HQ 955883, dated February 27, 1995 as support. HQ 223654 involved imported civil aircraft and parts under tariff provisions that implement the Civil Aircraft Agreement (“CAA”). CBP stated in HQ 223654 that subheadings of the HTSUS that implement the CAA are not actual use provisions and do not require proof of actual use. Accordingly, HQ 223654 is not on point in this case.
In HQ 082360, dated March 15, 1991, imported ethanol was entered under subheading 9901.00.50, HTSUS. The issue presented was whether special accounting procedures described to keep track of imported ethanol production and sales was sufficiently complete to satisfy 19 CFR 10.131-139. The question presented was whether the recordkeeping was capable of tracking all of the imported ethanol from entry through end use to demonstrate that the ethanol was used for a nonfuel use. HQ 082360 stated that if any ethanol was used or sold as fuel, Customs would be notified immediately. CBP held that the accounting procedures were capable of tracking all of the imported ethanol. HQ 082360 differs from the instant case in that First Cash has not provided any system or practice which will ensure that First Cash would pay duties on any jewelry pieces not melted and sold.
In HQ 955883, dated February 27, 1995, imported naptha was classified in subheading 2710.00.18, HTSUS, as blendstock rather than in subheading 2710.00.25, HTSUS, the provision for naptha except motor fuel or motor fuel blending stock. The imported naptha was fungible and was blended with domestic naptha. Certification for end-use as blendstock could not be obtained for certain quantities of the tank containing both domestic and imported naptha. The issue presented was how to treat the quantity of naptha for which an end-use could not be certified. There was discussion of commingling, and whether all of the imported naptha for which there was no end-use certification should be classified in subheading 2710.00.18, HTSUS. CBP allowed only the amount for which the importer stated was used as fuel to be classified in subheading 2710.00.18, HTSUS. Both these rulings are distinguishable from the instant case because they deal with fungible products and duty was paid on the portion of the imported goods for which end use could not be shown. The imported goods are individual unique pieces of jewelry that are not fungible and CBP is concerned that duties would not be paid for those pieces for which actual use is not demonstrated, since those jewelry pieces are resold instead of being melted. Although counsel has stated that they made a prior disclosure dated January 29, 2010, and they will tender duties for all items that they concede were not melted, CBP has no way in which to confirm that duties were paid for all unmelted jewelry and other items that were imported and resold in the U.S. Further, in neither HQ 955883 or HQ 082360 is it shown that the importer knew at the time of importation that all of the imported merchandise would not be actually used as classified. In this case, it is known at the time of importation that the jewelry will be re-sorted in Arlington, Texas and that some of the jewelry may not be melted. Therefore, the conditions of the actual use provision are not met.
Counsel also argues that the principle of commingled merchandise should have been applied at the time of entry and the eligible goods should have been segregated from the ineligible goods. However, as stated above, the importer did not finally determine which goods would be melted until after entry. Therefore, none of the goods were eligible for preferential tariff treatment under subheading 9817.00.98, HTSUS, at the time of entry as required by the actual use provision.
Further, we note that the tracing methodology provided for the jewelry after importation only accounts for the jewelry by weight, not by individual piece, and the weights differ from one document to the next document. As stated above, unlike ethanol or naptha, the jewelry pieces are unique and not fungible. Therefore, the methodology proposed by the protestant does not enable CBP to substantiate that the entire shipment of jewelry pieces actually entered are the pieces that are melted and not resold after importation.
The Protest is hereby denied.
HOLDING:
The protest is hereby denied.
In accordance with Sections IV and VI of the CBP Protest/Petition Processing Handbook (HB 3500-08A, December 2007, pp. 24 and 26), you are to mail this decision, together with the Customs Form 19, to the protestant no later than 60 days from the date of this letter. Any reliquidation of the entry in accordance with the decision must be accomplished prior to mailing of the decision. Sixty days from the date of the decision Regulations and Rulings of the Office of International Trade will make the decision available to CBP personnel,
and to the public on the CBP Home Page on the World Wide Web at www.cbp.gov, by means of the Freedom of Information Act, and other methods of public distribution.
Sincerely,
Myles B. Harmon, Director
Commercial & Trade Facilitation Division